Diversified Energy sells majority stake in Appalachia assets

by | Jan 2, 2024

(Sharecast News) – Diversified Energy has sold producing assets in Appalachia to a special purpose vehicle, DP Lion Equity Holdco, it announced on Tuesday, while retaining a 20% minority interest in the vehicle and continuing to operate them.
The FTSE 250 company said the transaction yielded $200m in proceeds for the company.

After accounting for transaction-related costs, the net proceeds were used to repay outstanding borrowings under its sustainability-linked loan, resulting in a reduction in net debt of 12%, while the remaining funds were allocated for general corporate purposes.

The transaction’s implied valuation was a multiple of 5.7 times the anticipated hedged 2024 EBITDA, estimated at $35m.

They were previously used as collateral for the sustainability-linked loan and held a PV-10 valuation of $230m, with a gross production rate of around 50 million cubic feet equivalent per day.

“This latest transaction further demonstrates the attractiveness of Diversified’s asset base that provides reliable production and consistency of cash flows,” said chief executive officer Rusty Hutson Jr.

“At an attractive multiple, this transaction has provided a path for the company to unlock additional value from our assets, reduce our outstanding debt, and enhance our liquidity.”

At 0845 GMT, shares in Diversified Energy Company were up 3.36% at 1,152.5p.

Reporting by Josh White for Sharecast.com.

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